The document discusses successfully managing customer relationships and product portfolios through data-driven marketing. It notes that leadership wants growth but marketing lacks data and skills. The state of marketing is described, and the importance of understanding customer capacity and propensity is emphasized. A case study shows how continuous communications targeting products to customers based on their data increased balances, relationships, and adoption of services.

1. SUCCESSFULLY MANAGING CUSTOMER
RELATIONSHIPS AND PRODUCT
PORTFOLIOS
Trevor Knott & Tim Keith,
Baker Hill Analytics & Marketing

2. Confidential & Privileged DocumentConfidential & Privileged Document
The current state of the consumer business and marketing at
mid-tier and community banks and credit unions.

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1. Leadership wants more
new business and higher
profits.

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2. They know that customers
expect to be engaged
across multiple channels.

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3. Marketing needs data to
do this, but don’t trust
they have access to it.

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4. Even if they had the data,
they don’t know what to do
to execute on it or how to
measure it.

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The state of the state
• Leaders want more business and higher profits.
• They must engage customers across multiple channels.
• Marketing doesn’t trust they have the data to accomplish this.
• Even if they had the data, they often don’t know how to
execute on it, or measure it’s effectiveness.

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Effective Data Driven Marketing
• Recognizes that retail banking is a relational marketing
environment.
• Recognizes that profitable customers have multiple financial
needs and that those needs evolve and change over time.
• Recognizes that meeting a greater share of these needs over
time increases wallet share, profitability and retention.
• Recognizes that leveraging broader customer relationships
can optimize both marketing efficiency and cost of funds.
• Is ultimately a discipline not a silver bullet strategy.

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Marketing : Sales Interface
• 2 Things Required for any Successful Sales Process:
• Capacity
• The person you are selling to must have the basic means to buy
the product
• Propensity
• The person you are selling to must have at least some inclination
to buy the product

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Strategic Customer Management
• Retail bank product sales take place in a particular relational context
• Growth can be sustained through a methodical, disciplined approach to attracting the right
households and migrating them to optimized profitability as key indicators of Capacity and
Propensity present themselves in the data
High Deposit
Active
Credit
Transactor
Limited
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Key Capacity/Propensity Indicators
• Capacity
– Current household deposits with the institution
– Current checking balance
– Net worth
– Income
– Home value
• Propensity
– Recency of account opening
– Presence of a checking account with the institution
– Number of services with the institution
– Active usage of electronic services with the institution
– Past/current usage of specified product types (credit, CD)
– Distance to branch

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Example – Single Service Relationships
Average
Product Category Households Penetration % Total Balance Balance
Non Interest Checking 16,479 52.68 $63,076,748 $3,828
Interest Checking 31,798 48.18 $346,800,081 $10,906
Total Checking 44,427 51.78 $409,876,829 $9,226
HSA 4,172 58.31 $7,367,138 $1,766
Savings 3,469 11.68 $32,313,462 $9,315
Money Market 294 14.37 $33,601,820 $114,292
Short Term CD 181 24.83 $15,865,999 $87,657
Long Term CD 2,227 27.24 $191,747,145 $86,101
CD 2,349 27.39 $207,613,144 $88,384
IRA 1,627 26.52 $27,372,108 $16,824
Direct Loan 1,539 15.42 $6,193,178 $4,024
Overdraft Protection 2,212 58.31 $838,100 $379
Home Equity 314 4.97 $7,111,206 $22,647
Mortgage 2,798 27.60 $209,967,921 $75,042
Total Deposits 56,338 56.97 $718,144,500 $12,747
Total Credit 4,656 20.45 $224,226,672 $48,159
Total Electronic 32,706 49.01
Total Households 60,994 58.83

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Example – Deposit Concentration
•Households with $100,000 or greater in deposits make up 6% of deposit households
and control 65% of total consumer deposits. 1,192 do not have checking.
•Households with $10,000 or greater in deposits make ups 28% of deposit households
while controlling 95% of total consumer deposits. 4,123 do not have checking.
% % Total Deposit Average % Balance With With Checking Single
HH Deposits Households of Total Index Balances Balance of Total Index Checking Checking Index Service
$100,000+ 6,272 6.34 102 $1,573,455,301 $250,870 64.70 109 5,080 80.99 110 1,747
$50,000 - $99,999 4,785 4.84 95 $338,147,888 $70,668 13.90 89 4,080 85.27 107 1,463
$10,000 - $49,999 16,604 16.79 100 $389,596,065 $23,464 16.02 86 14,378 86.59 105 6,122
$2,500 - $9,999 18,086 18.29 108 $95,030,006 $5,254 3.91 78 15,837 87.56 104 8,586
$1 - $2,499 52,175 52.76 104 $35,616,865 $683 1.46 92 45,823 87.83 120 37,806
High Deposit HH 27,661 27.97 99 $2,301,199,253 $83,193 94.63 101 23,538 85.09 107 9,332

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Key Benchmarking Questions:
• How does accounts per household compare to peers?
– Where do gaps coincide with strategic areas of focus?
• What percentage of my total households were new in the last 12 months and how does
that compare to peers?
– How am I doing at deepening New Household relationships?
• What percentage of households only use one service?
– What is cross-sell potential and attrition risk among single service households?
• How concentrated are my deposits?
– Do 3% of households control 50% of deposits? Is this normal?
• How well penetrated are High Depositor Households with checking?
– Am I meeting the credit needs of my most profitable customer relationships?
• Is the overlap between deposit and credit usage normal?
– What is my opportunity to sell more loans to depositors and vice versa?
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133
108
180
116
150
111
75
101
53
141
69
104
112
165
96
172
124
144
0 50 100 150
% Penetration Index
Average Balance Index
Non Interest
Checking
Interest
Checking
Total Checking
Savings
Money Market
CD
Home Equity
Example Comparison to Norm - High Deposit Households

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Key “go to market” principles
– The more they have with you, the more they have somewhere else – the
most efficient source of deposit growth is existing customers
– The best retention tool is proactive cross-selling
– Hoping that customers don’t wake us as rates rise is not a strategy
– With declining branch visits and cell phone call screening, it is vital to
provide customers a way to self identify as “in market”
– Checking attrition and general cross-sell are heightened for New HH
– Prospecting is like buying an annuity, long-term value is based on the
underlying growth potential of the new customer acquired
– Digital channels vastly expand awareness while making outreach dynamic
– What most banks are missing is the discipline to consistently execute
– Benchmarking is highly effective in gauging relative capacity/propensity
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Example 12 Month Proforma
New Average Total Halo Halo Contribution 12 Month 36 Month
Deposits Accounts Balance Balance Accounts Balance Impact ROI ROI
Checking Cross-sell 763 $7,000 $5,343,030 878 $4,579,740 $263,335 214% 513%
Checking Up-Sell 1,868 $9,500 $17,741,645 2,465 $11,205,250 $620,958 343% 1030%
CD Cross-sell 4,196 $47,500 $199,286,250 4,196 $41,955,000 $697,502 250% 600%
MM Cross-sell 1,342 $67,500 $90,595,800 1,342 $13,421,600 $475,628 163% 390%
Credit Card 2,790 $2,500 $6,975,000 977 $4,882,500 $697,500 153% 320%
Homeowner Loan 3,328 $37,500 $124,800,000 1,165 $5,824,000 $1,664,000 405% 851%
Debit Card 1,808 N/A N/A 904 $4,519,900 $180,796 156% 375%
Grand Total 16,094 $31,130 $444,741,725 11,926 $86,387,990 $4,599,718 259% 622%
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Case Study: Bank with 53 branches
• Objective: use a continuity based customer communication
program to achieve the following strategic objectives:
– Grow checking accounts and balances
– Enhance retention of High Deposit Households
– Cultivate new sources of fee income through expansion of
transactional service adoption – reduce “legacy gaps” in electronic
service usage
– Grow earning assets in equity secured lending categories
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Case Study: Bank with 53 branches
• Key Program Elements:
– Continuous omni-channel outreach consisting of:
• Direct mail
• Email
• IP based and Facebook digital ads
• Branch call lists
– Monthly product focused offers rotating through:
• Checking
• Lending (home equity, small business)
• Transactional services
– Capacity/Propensity based targeting of messages
– Quarterly comprehensive tracking reviews
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Case Study: Bank with 53 branches
• Key results metrics first 18 months:
– 4,214 individual product responses
– $158 million in response account balances
– Responders also opened 847 other deposits and loans during the
campaign they responded to (halo effect)
– 1,005 clicks on digital messages
– 635,364 total digital ad impressions
– 748 incremental services adopted by New Households
– $17.6 million incremental deposit fund-up by New Households
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The Bottom Line
• Portfolio Impacts:
– $157 million in new earning
assets in targeted loan buckets
– 920 new active checking
accounts
– $10 million in net new
deposits from checking
responders
– $2 million in deposit halo
balances from loan responders
• Relationship Impacts:
– 1,523 Single Service Households
converted to multi-service
– 427 Tenured Deposit-Only
Households bought a loan
– 145 Loan-Only Households
bought a checking account
– 3,837 new transactional
services adopted by Tenured
Checking Households
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23. QUESTIONS & ANSWERS
Trevor Knott
trevor.knott@bakerhill.com
Tim Keith
tim.keith@bakerhill.com

24. THANK YOU!